The Death of the NFC Mobile Wallet?

While mobile wallets certainly get a lot of hype, actual usage among U.S. consumers has not grown to a significant level. That's due to a number of factors -- such as giving consumers a compelling case to ditch their plastic cards -- but also because the mobile wallet space has yet to shake out a clear winner. There are a number of different wallet providers, and, perhaps most importantly, some wallet products are NFC-based while others are cloud-based.

However, could there be a tipping point in that last case? This week, Google Wallet decided to move further away from its NFC origins as it released an updated version of the app for all Android phones version 2.3 and higher, and to AT&T, T-Mobile and Verizon subscribers, which will not have an NFC component. Initially, only Sprint customers could use the Google Wallet app.

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Part of the reason for the initial reluctance of AT&T, T-Mobile and Verizon to support the app was undoubtedly due to the telecom companies wanting to push their own mobile wallet product, the NFC-based Isis. However, there was some troubling news for that mobile wallet venture this week after Capital One announced it was ending its pilot test with Isis, without giving an official reason why.

Could this be a signal the market is moving away from NFC payments? Well, there are still several banks and card companies signed up with Isis, and NFC payments programs continue to be announced. So it's obviously too early to make any definitive statements. But it will be interesting to follow future mobile wallet announcements to see if this becomes a trend.

Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as a municipal and courts reporter for daily newspapers in upstate New York, Bryan has ... View Full Bio

It seems like it is certainly a challenge. Over the weekend, I went to a flower farm to purchase mums and had to drive 20 minutes away to go to the ATM because the merchant took neither credit/debit cards nor checks. And even in many areas of a populated state like New Jersey, if some vendors still aren't even accepting cards, it could take a while for NFC to get merchants to sign on.

Yes, Apple is probably the one company that could significantly push the mobile wallet forward in the U.S., but ultimately it comes down to the same question: Why is this better/more convenient than using my card? A product that takes full advantage of what mobile can offer (i.e. geo-targeted offers) may finally tip the scales.

I have always maintained that it will take a company with significant market share to push the mobile wallet into the mainstream. A company with a big mobile phone user base would allow retailers to focus on one type of payment process, instead of having to cater to many different types of devices (with different readers and security protocols).

Despite gains by Android manufacturers in the marketplace, there are too device variations amongst the manufacturers. Apple remains the one company that can enable mobile wallet adoption by allowing mobile wallet capabilities. Will iBeacon be the technology to allow broader adoption of a mobile "wallet"? Who knows...maybe.

It's important to remember that NFC wallets operate on the same ISO standard as contactless EMV, so any terminal capable of accepting contactless EMV can support NFC-based wallets. So, merchant acceptance for NFC-based wallets will increase significantly as the US adopts the standard over the next several years. The bigger issue for NFC-based wallets is the operating model for managing the secure element on the phone (e.g., who owns the chip? how does card data get pushed to it? etc).

The iBeacon in the new iPhone 5S would seem like another issue for NFC that popped up in the past week.

Bryan's right that at some point merchants are going to have to get new terminals. But I don't know if they are going to have NFC in mind if more announcements like this come out about mobile wallet companies moving away from NFC.

Yes, nothing has certainly been decided yet. As many have stated, the biggest hurdle to NFC is getting a large amount of merchants to have the hardware installed to be able to accept them. But as they have to upgrade their POS terminals anyway in the future, they may decide to pursue NFC-enabled ones.

I think there is still room for an NFC-based wallet, but we are still a ways away. First, security concerns need to be addressed, and more traditional bank users will need to be convinced, as the article mentions, to ditch credit cards. I have to admit, I ONLY use credit cards for everything, and it would be hard to change my ways now.